US Stock Futures Decline; Dollar Rebounds Post Fed Meeting

Equities

Major US stock-index futures tumbled amid growing concerns of a second wave of coronavirus infections which could weigh on the economy again. Texas reported a record COVID19 hospitalization cases, also several counties in California had a spike in new cases. This is signaling that maybe some states opened too early which would have a severe impact on the economic activity. On the other hand, investors assessed the Federal Reserve monetary policy meeting outcome. The economic projections hinted that the full recovery will take till 2022. The Dow Jones Industrial Average futures fell to 26379, the S&P500 futures declined to 3129, and Nasdaq futures faltered at a record high of 10154 and dropped to 9944.

USD

The dollar index, which measures the greenback against a basket of major currencies, rebounded from a three-month low of 95.72 to 96.49 post the Federal Reserve policy meeting. As expected, the Federal Reserve kept monetary policy unchanged with interest rates between 0-0.25% and buying Treasury and MBS at the current pace, which is estimated to be around $4 billion per day, way less than in March. The dot plot showed that most members believe that interest rates will remain at their current low levels until at least 2022. The Fed expects the GDP to contract by 6.5% this year and grow by 5% in 2021. There were some expectations that the Federal Reserve will adopt Yield Curve Control, which could have had some significant pressure on the dollar. However, Powell declared that they are still studying its effectiveness, helping to push the dollar slightly higher. The EURUSD declined to $1.1324, the GBPUSD fell to $1.2650, and the AUDUSD tumbled to $0.6905. Market participants are looking forward to the weekly jobless claims to have the latest insight into the continuing effects of the Coronavirus outbreak on the US labor market.

Gold

Gold prices extended upside rally supported by the Fed's intentions to keep interest rates at their current low levels until at least 20220. When asked about raising interest rates, Jerome Powell replied: "We are not even thinking about thinking about raising interest rates," diminishing the chances of any interest rate hikes soon. The price of a gold ounce rallied to $1740, the price of a silver ounce inched higher to $18.16, while palladium futures held steady slightly below $1950.

Oil

Oil prices ticked lower following the US inventory report and the Fed's policy meeting. The US Energy Information Administration reported a buildup of 5.7 million barrels in inventories to a record of 538.1 million barrels, raising oversupply concerns. On the other hand, the Fed economic projections revealed that the full economic recovery would take years, which could continue to weigh on oil demand levels. The West Texas Intermediate crude July delivery dropped to $37.89, and Brent blend August delivery fell to $40.09.

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